Victorian state land tax is assessed on the site value (unimproved land value) of all land owned by individuals, companies and trusts, subject to a limited number of exemptions.
Main exemption is for your Principal Place of Residence. There are other examples, including:
land used for primary production
land used for sporting activities
land owned by charitable organisations
The State Revenue Office gets its land valuations from local councils - it does not itself do any land valuations.
In 2019, valuations have been updated following revaluations done by councils in January 2018 (in the height / peak of the property boom).
Many property owners have now received State Land Tax assessments that have massively increased on assessments from 2017 and 2018 – in some cases doubled.
There are many reasons why valuations have increased that include rezoning of property and market forces. However, current values are now not reflected in the 2019 assessments.
Parties affected include individual (often elderly) property owners who have built up a portfolio of investment properties to cover their retirement. The amount of land tax assessed in 2019 for some of these investors may exceed the rents. Some asset rich cash/income poor property owners may be forced to sell property, in a falling market, as they cannot afford to pay the tax now assessed.
Could I be paying too much?
We have now found significant errors in Council valuation / assessments for site values that have had a substantial flow on effect in Land Tax assessments. Errors include:
Human error - setting capital improved value the same as site value on the Council rate notices and then passed onto the State Revenue office. Your capital improved value should not be the same as the site value unless the property is vacant land.
However, this needs to be considered taking into account the location, size and zoning of the property. Some councils are now assessing site value based on what the council considers to be the "highest and best use of the subject land" which may not be relevant to the current use - i.e. residential house vs multiple unit development site etc.
This will limit your rights to object but must still be reviewed carefully to see if you still have a commercially viable ground to object.
Each property needs consideration firstly when you receive your council rate notice and secondly when you receive a land tax assessment notice.
Time frames apply - you have 60 days to object to council rate assessment from when you receive the notice. You also have 60 days to object to a land tax assessment from the date of the assessment notice.
Council including land not owned by the assessed party in their rates assessment, e.g an industrial property where one tenant leases land from multiple adjoining owners. Tenant approached Council and it agreed, without consulting property owner, to amalgamate the rate assessment to simplify the accounting and payments by the tenant! In such a cases, the property owner is rated (paid by tenant) and gets Land tax assessment for double previous assessment ( $300,000+ in land tax)
There has also been recent case law that has expanded the definition of "retail activity" for commercial leases. Under the Retail Leases Act 2003 (as amended), Landlords cannot pass on land tax assessed on the property to the tenant as an outgoing where the property is used for retail provision of goods and/or services. Many tenants are now seeking advice if what was considered non-retail is now retail, especially when they get a massively increased Land tax bill to pay.
Can I object and what are consequences?
When you object to State Land tax assessments you still have to pay the full assessment when it falls due, and wait the – up to 4 months plus period for the State Revenue Office and the relevant councils to consider your objection.
Objections must be lodged within 60 days from the date of the notice of assessment - not when it is received.
If you would like confidential and personalised advice about your land tax obligations as either landowner or commercial tenant, please speak to our Property Law team, led by Partner and Accredited Property Law Specialist Barry Northfield.
Are you following all our socials yet? Keep up to date with all the news in the areas of law we cover